The end of the beginning

That's more like it - a tax cut for everyone earning less than £40,000.

The measures announced are only for this one year, so the issue will return in the run up to next year's budget (not to mention that there are quite a lot of people, substantially fewer than 1.1 million, who are still worse off even after these changes).

What I hope is that the government realises is that there has been some valuable political space in the longer term opening up as a result of the whole 10p tax fiasco. Next year's Budget needs to meet two key objectives. Firstly, by 2010, all of the low earners who were hit by the abolition of the 10p tax rate should be substantially better off, thus cutting the number of people in work yet still in poverty, and secondly the government needs to meet the target of halving child poverty, which at the moment they are going to miss.

The Tories have been making some very strong statements and basing their by-election campaign about how disgraceful it was to make low income earners worse off by scrapping the 10p tax rate. Labour shouldn't run away from having the argument about whose policies are better for lower earners, and shouldn't let the Tories and the media drop this issue after next Thursday either. Funding this particular tax cut through borrowing makes good political and economic sense, but a much bigger tax cut for low and middle income earners next year should come from those who have seen their incomes grow massively over the last eleven years.